The market borrowings of Indian states increased by 38% in a year. The Union government had set a target of reducing borrowing from the market last year to bring 'financial discipline'. Nevertheless, due to Lok Sabha and assembly elections in some constituencies, the states raised a lot of money from the market to fulfill the 'work' and 'promises' on time.
The surprising thing in the Reserve Bank of India (RBI) report is that Chhattisgarh, with a population of 3 crore, has spent Rs 26,213 crore this time and took a loan of Rs. 2,287 crores. It repaid the loan of Rs. 2,287 crores which means Rs 28,500 crore was too much. At the same time, UP, with a population of 24 crores, took Rs 43,538 crore more loan than last year. Whereas Punjab took an approximately Rs 4 thousand crore less loan today. Jharkhand is the only state in this list which did not take any new loan throughout the year. It spent Rs 2,505 crore which has been repaid.
Gujarat and Punjab were such states where the debt decreased from last year. Experts say that for financial discipline it is necessary to raise less debt from the market. The central government had also emphasized on reducing borrowing from the market for 2024-25. It is important to note that Punjab also offers several government aided facilities free of cost, including free electricity. While there were worries of increase in debt thanks to these facilities. However, the decrease in the loan amount paints a positive picture regarding the state’s economy.
Loan increased by 86% in Maharashtra, 9% in Bihar, decreased by 2% in Madhya Pradesh, Jharkhand is at the forefront in repayment of loan. The highest increase in debt among the states was in Kerala by 71%. Gujarat took 57% less loan than last year.
According to reports, debt will increase, but not fiscal deficit, as states achieved capital investment targets. However, the fiscal deficit remained below the target because the capital investment target was achieved. Rs 8.37 lakh crore for 23-24. The target was capital investment of Rs. States spent 84% of this (Rs 7.02 lakh crore). Among the big states, Bihar (115.6%), Telangana (118.4%) and UP spent more than the target. The performance of Madhya Pradesh (93.1%), Jharkhand (95.2%) was also better.
The performance of Chhattisgarh (49.6%), Haryana (68.2%), Rajasthan (73.7%) and Maharashtra (75.1%) was weak. States borrowed from the market but they also had the option to borrow money from National Small Savings Funds. But, the government increased the interest rates of small savings schemes last year. Therefore, it was cheaper to raise loans from the market. However, this did not affect the financial deficit of the states. The fiscal deficit in large states (except Bihar) was up to 50% less than the target.
*State, FY 2023-24, FY 2022-23, Difference
- Chattisgarh, Rs 26,213, Rs -2,287, -
- Uttar Pradesh, Rs 85,335, Rs 41,797, 104.17%
- Maharashtra, Rs 79,738, Rs 42,815, 104.17%
- Kerala, Rs 26,638, Rs 15,620, 70.54%
- Rajasthan, Rs 49,718, Rs 30,110, 65.12%
- Telangana, 39,385, Rs 30,922, Rs 27.37%
- Bengal, 48,910, Rs 42,500, Rs 15.08%
- Madhya Pradesh, Rs 26,264, Rs 26,869, -2.25%
- Punjab, Rs 29,517, Rs 33,660, -12.31%
- Gujurat, Rs 11,917, Rs 28,300, -57.28%
- Jharkhand, Rs -2,505, Rs -155, -
Total: 7,17,140, 5,18,829, 38.22%
*Amount in thousand crores